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Neither Lord McAlpine nor Davies were in court for today's hearing in London, where lawyers outlined details of the libel action.

Davies hoped that other Twitter users would be more aware of the "potential damaging consequences of tweeting", a lawyer representing the comedian told the judge.

He accepted that the "allegations" about Lord McAlpine were "completely untrue".

Lord McAlpine (Image: Ian Vogler/ Daily Mirror)

Lord McAlpine is a former Tory deputy chairman and treasurer who was a "close aide" to Margaret Thatcher between 1979 and 1990, and had a "significant political profile" during the late 1970s and 1980s.

Sir Edward Garnier QC, for Lord McAlpine, told the judge that on the morning of November 2 last year the then "managing editor of the Bureau of Investigative Journalism" tweeted: "If all goes well we've got a Newsnight out tonight about a very senior political figure who is a paedophile."

Sir Edward said the prospect that the BBC current affairs programme was going to broadcast such an allegation prompted further Twitter activity.

That evening Newsnight broadcast a report about the sexual abuse of boys at the Bryn Estyn children's home in Wrexham, Clwyd, in the 1970s and 1980s, and accused an unnamed "leading Conservative politician from the Thatcher years of sexually abusing boys in care".

Sir Edward, a Conservative MP, said that, prior to the broadcast, Davies tweeted: "Any clues who this Tory paedophile is...?"

He said a few minutes later Davies received a reply which contained links to three websites, including to an article about an inquiry into abuse at the Bryn Estyn home and to a Swedish website which "purported to report on a paedophile ring in the British establishment".

Sir Edward said the reply tweet then said "lord mcalpine, some would say".

He added: "Most unfortunately, Mr Davies retweeted that tweet. At the time he had a substantial number of followers on Twitter - in excess of 400,000.

"The allegations about Lord McAlpine were completely untrue, as Mr Davies and those involved in the Newsnight programme now accept. Mr Davies has withdrawn the allegation unreservedly.

"Mr Davies's retweet caused Lord McAlpine great embarrassment. He was very distressed to learn how Twitter was being used to spread such allegations about him at a time when he was seeking to limit the damage caused by Newsnight's broadcast.

"Mr Davies has apologised to Lord McAlpine and agreed to pay him damages and his costs."